Out-Law News | 16 May 2018 | 11:08 am | 1 min. read
Insurers participating in this year's stress testing exercise by the regulator will be required to fill in a questionnaire dealing with their exposure to cyber risk. They will also be assessed on three separate stress scenarios, including one which considers the impact on insurers of a series of environmental catastrophes and extreme weather events across Europe in a single year.
"Cyber risk has been gaining momentum as a growing concern for institutions, individuals and the market," EIOPA said in a document setting out this year's stress test scenarios.
"Given the current context of digital transformation and its implications for the economy and more specifically the insurance sector, cyber risk is currently considered as one of the main emerging risks as it climbed to the top positions in the list of global risks for business in less than five years. Additionally, large-scale cyber attacks rank sixth in the list of risks most likely to occur in the next 10 years," it said.
EIOPA has chosen 42 European insurance groups to participate in its fourth annual stress testing exercise which have been selected based on their size, market coverage and relevance to overall financial stability. Together, participants account for close to 78% of total European insurance market coverage.
Participating insurers will be required to fill out a standard template setting out how financially prepared they are for each of the scenarios prepared by EIOPA, and submit this to their national regulators by 16 August 2018. Responses must be based on their financial positions as at 31 December 2017. EIOPA expects to publish the results of the stress test in January 2019, and will also encourage individual insurers to publish their own results to increase public transparency.
The exercise is not designed to be 'pass or fail', but rather to raise awareness of potential threats to financial stability and assess the European insurance sector's vulnerability to specific adverse scenarios, according to EIOPA.
"The scenarios reflect severe but plausible external shocks, including insurance-specific shocks," said EIOPA chairman Gabriel Bernardino. "Furthermore, for the first time the exposure to cyber risk and best practices in dealing with these risks is assessed."
"This stress test will therefore provide further valuable insight to the resilience of the European insurance sector. The increased transparency is key to ensure a level playing field and enhance market discipline among the stress test participating groups," he said.